India: An Employment Overview
The Indian Labour and Employment Law Landscape: The 2026 Outlook
The year 2026 represents a defining phase in the evolution of labour and employment laws in India, marked by the transition from legislative reform to practical enforcement and interpretation. Following the long-awaited implementation of the four consolidated Labour Codes in late 2025, stakeholders across sectors are now navigating a restructured legal framework that aims to simplify compliance, enhance worker protection, and promote ease of doing business.
At the same time, progressive state-level initiatives and emerging policy debates signal a broader re-imagining of employment relationships in India, with increased emphasis on inclusivity, welfare and work–life balance.
The Labour Codes
The enforcement of the Code on Wages, 2019 (the “Wage Code”), the Code on Social Security, 2020 (the “SS Code”), the Industrial Relations Code, 2020 (the “IR Code”) and the Occupational Safety, Health and Working Conditions Code, 2020 (the “OSH Code”) (collectively referred to as the “Labour Codes”) has replaced a fragmented regime of 29 central labour laws with a unified statutory structure. While the Labour Codes have been formally implemented, the central and state specific rules thereunder are yet to be notified and accordingly the procedural nuances of enforcing many of the provisions of the Labour Codes remain ambiguous.
The most immediate impact felt across corporate India is the “50% wages rule”, which stipulates that at least 50% of an employee’s total remuneration must be considered as “wages” for the purpose of calculating statutory benefits. The unified definition of “wages” has cleared up the long-standing ambiguity surrounding the treatment of wages, under various labour laws, specifically in the context of determining eligibility of employees for various employee benefits and the computation of the same. This has also resulted in an extended coverage of social security schemes such as provident fund and employees state insurance, bringing a larger chunk of the India Inc into its ambit of coverage.
A significant development under the new regime is the formal recognition of gig workers, platform workers and unorganised sector workers within the social security framework. For the first time, aggregators and platform-based companies are statutorily required to contribute towards social security schemes, including insurance and welfare benefits, subject to thresholds and notified schemes. While the implementation of these provisions is still evolving, they mark an important step towards extending statutory protection to a rapidly expanding segment of India’s workforce that traditionally remained outside labour law coverage.
The IR Code has introduced structural changes to trade union recognition, dispute resolution and retrenchment thresholds. The increased threshold for prior government approval for lay-offs, retrenchment and closure has been welcomed by the industry as a measure that enhances operational flexibility, particularly for large manufacturing establishments.
The OSH Code has consolidated safety and welfare provisions across multiple sectors, including factories, mines, construction, and contract labour. Enhanced obligations relating to workplace safety, health standards, welfare facilities and employer accountability have come into sharper focus as inspections transition towards a technology-driven and facilitative model. Further, the recharacterisation of inspectors as “facilitators” reflects an intent to promote compliance through guidance rather than punitive enforcement, although employers remain subject to significant penalties for non-compliance with safety norms. The OSH Code also mandates the requirement to issue formal appointment letters and maintain prescribed registers, thereby strengthening documentation standards and reducing ambiguity in employment relationships.
State level reforms
Alongside the central reforms, state-level initiatives have played a critical role in shaping the employment law discourse. The notification of the Karnataka Menstrual Leave Policy, 2025 has set a national precedent by mandating one day of paid menstrual leave per month for women workers across both public and private sectors. This policy serves as a crucial recognition of biological health within the productivity-focused legal framework. However, the constitutionality of the policy is currently being scrutinised by the Karnataka High Court. The Karnataka model has intensified discussions across other states regarding the introduction of similar benefits, with some considering alternative approaches such as wellness leave or gender-neutral health policies.
Another notable theme gaining traction is the recognition of work–life balance and mental well-being in the digital age. The reintroduction of the Right to Disconnect Bill in 2025, although not yet enacted, has continued to influence corporate discourse and HR practices. The proposed legislation seeks to protect employees from work-related communications beyond prescribed working hours and to prevent adverse action for exercising such rights. Notably prior to the introduction of the said bill, the state of Kerala introduced the Kerala Right to Disconnect Bill, 2025, which is specifically aimed at ensuring work–life balance for private sector employees within the state, calling for the creation of district-level private sector workplace grievance redressal committees to investigate complaints and oversee compliance. If enacted soon, Kerala would become the first Indian state to legislate such a right, aligning with global trends while testing the practical enforceability of digital boundary protections at a sub-national level.
Additionally, and as an extension of the existing provisions under the SS Code, several state governments such as Karnataka, Jharkhand, Rajasthan and Bihar have adopted and enacted legislations around gig and platform workers intended to extend social security and welfare benefits to platform-based gig workers engaged through such platforms within these states.
Notably in 2025, several Indian states such as Haryana, Punjab and Delhi have also notified amendments to their state-specific shops and establishments Acts, implementing several relaxations for shops and commercial establishments on, inter alia, working hours and the engagement of women employees at night, aimed at boosting operational flexibility and ease of doing business.
Way forward
From a compliance perspective, 2026 has underscored the importance of proactive legal alignment. Employers are required to revisit employment contracts, HR policies, standing orders and payroll structures to ensure consistency with the Labour Codes and applicable state rules (as and when such rules come into force). Enhanced record-keeping obligations, digitised filings and unified registration requirements have streamlined certain processes, while simultaneously increasing transparency and accountability.
Looking ahead, India’s labour and employment law framework in 2026 remains dynamic and in transition. As judicial interpretation, administrative clarifications and state-level amendments continue to shape the practical application of the Labour Codes, stakeholders can expect further evolution rather than stability in the short term. Progressive welfare measures such as menstrual leave, coupled with emerging debates on digital rights and work–life balance, indicate a gradual shift towards a more holistic understanding of employment regulation.
For employers, legal advisers and HR professionals, the key challenge lies in balancing compliance with flexibility, aligning business objectives with worker welfare, and responding effectively to a transformed and increasingly sophisticated labour law environment.